Tractors at work in Germany. A shortage of arable farmland is leading to intercontinental 'land grabs' creating greater pressure on the environment and provoking political crises. Photograph: Sean Gallup/Getty Images

A few diehards in the City still think sustainability is just for sandal-wearers. But how we deal with the major ecological and social challenges facing the world will have enormous implications for the global economy and for the prospects of the UK's leading companies. It will also have an impact on the pension savings and the purse strings of virtually every household in Britain. The BP oil spill, which wiped billions of pounds off the value of pension funds, is evidence that no investor, large or small, can afford to ignore the environment, or the issue of how we manage our resources.

The Observerhas commissioned in-depth research from The Co-operative Asset Management into how the UK's leading companies might be affected by five key sustainability issues: resource depletion, climate change, pollution, demographics and resource distribution. Its analysis suggests that 56%, or more than half of the FTSE 350 by weight, will suffer negative financial effects from depleting resources, climate change and pollution. Only 10% stand to gain by providing solutions.

This is a warning of testing times ahead for both business and society. It also presents a major challenge for the pensions industry, which needs to ensure its investments will be able to provide people with retirement incomes.

Ecology

Business should care about ecological sustainability because of the increasing scientific evidence that human society is overshooting its limits. Sources of food, energy and water are being exploited at rates that cannot be sustained for long, and many pollution sinks are overfilled. This is likely to jeopardise economic activity and growth, and leaves us at risk of a sharp contraction.

Both climate change and oil production are inextricably linked to food, energy and water systems. Oil depletion, for example, would have significant effects on food supplies, as many fertilisers, herbicides and pesticides are oil-based. Biofuels may compete with food for land use and oil use drives climate change, which adds pressure to the water, food and living systems.

The critical questions for economic sustainability are, first, whether these factors will come to impose an absolute ceiling on global economic growth and, second, to what extent these limits can be pushed back or overcome. As the government-commissioned Stern report pointed out, our actions now and in the coming decades could create risks of major disruption to the economy and society on a scale similar to the two world wars and the Great Depression.

Large companies recognise that they have a vested interest in this. In 2008, Shell outlined two distinct and plausible scenarios. It describes the bleaker scenario as a "scramble" or a disorderly decline in conventional economic growth as resources are exploited past the point of no return, in an environment where policy becomes dysfunctional and governments become protectionist about their national resources. The alternative, "blueprint" scenario involves a rocky transition to a new economic paradigm that requires a mixture of restrained use of resources, technological revolution and increasingly co-ordinated policy at local, national and global levels.

In June, the Green Investment Bank Commission Report put a price of £550bn on the infrastructure spending needed before 2020 to decarbonise the UK alone. If the right policies and investment are put in place this will not only help ensure the future, but provide opportunities for businesses and investors.

Even with such spending, companies – and the rest of us – face huge challenges including peak oil, the point at which production begins an inexorable fall, and the decline in biodiversity.

The numbers of non-human vertebrates have fallen more than 30% between 1970 and 2005: a decline highly detrimental to the functioning of ecosystems on which food supply depends. Many other species are also suffering – the dramatic decline in the bee population, a major pollinator for agriculture, is a key example.

Businesses are likely to be pushed into innovation and behaviour change to optimise resource efficiency and pollute less. That may reduce the constraints on growth and lead to new markets, for instance in clean energy. But there is still a significant risk that global economic growth will slow and turn negative because of ecological limitations. There is also significant potential for resource wars, particularly civil and border conflicts over water and fertile land.

Society

We all need food, shelter, education and healthcare, along with the ability to make a decent living. A key aspect of sustainability is meeting basic human needs within the planet's means. These concerns are shaping the actions of some of world's very richest: this month 38 billionaires have joined Warren Buffett and Bill Gates in pledging to give away over half their wealth.

Demographics are a major issue here. The world's population is expected to grow from around 6.7 billion to 9 billion by 2050. Aside from the obvious pressures on resources, most of the increase will come from developing countries and that will increase pressure to distribute wealth and resources more equally, and to improve the situation of the poor.

Many developed economies, including the UK and the US, have ageing populations, which presents its own risks to economic growth. People's contribution to the economy declines in older age and a smaller working-age population will have to struggle to support the elderly.

Poverty is linked to global insecurity and provides a breeding ground for terrorism. Recent global crises, including food price spikes, climate change and the credit crunch, have hit the poor hardest. Many large companies have considerable power either to exacerbate or to relieve these problems and could play a major role in realising the United Nations' millennium development goals.

Companies, especially multinationals, can make an important contribution to building sustainable societies by being responsive to the needs of poor people. The financial crisis has shown that corporate social responsibility and "ethical business" are no longer an add-on activity aimed at "taking off the worst edges" of the free-market system, but critical to a more stable functioning and should therefore be embedded in the way companies work and think. For forward-thinking enterprises, there is frequently a reward to be found in new markets.

In particular, companies need to be wise to the situation of women. More than two-thirds of the billion people living on less than a dollar a day are female. In developing or agricultural economies, women undertake a vast proportion of the work, particularly relating to water and food gathering. Women in traditional societies have a wealth of farming experience and present a major opportunity for efficient husbandry of resources, but only if they are empowered to make decisions.

Similarly, if women are educated, skilled and able to work, research has shown they use their incomes to plough back into their family, creating benefits for societies as a whole by spending on healthcare, education and better food.

Food

When the Russian wheat harvest failed this year because of drought, it drove wheat prices up 80%. This echoed a broader surge in food prices in 2008 that caused social unrest in a number of African countries. We do not know if climate change caused the drought, but we do know that it will bring increased volatility in future.

In general terms, we are witnessing symptoms of an agricultural system that is reaching crisis point at a time of growing demand from millions of people in Asia whose standard of living is rising. The biggest mining company in the world, BHP Billiton, is bidding for the world's largest listed producer of potash, a fertiliser that will be in much demand as emerging markets show increased appetite for meat and dairy products.

Unpredictable weather and bottlenecks affecting critical resources are enough of a problem, but the agricultural system will have to meet a host of other challenges.

The first challenge comes from within the industry itself. Agriculture has a huge impact on the environment as many fertilisers release nitrous oxide, which has 300 times the global warming potential of carbon dioxide.

An equally pressing problem is linked to the limited availability of arable land. A shortage of farms for growing crops has led to a land grab across the world as governments and corporations seek to secure food supplies. The issue is explosive, as Madagascar discovered two years ago. A proposed deal in 2008 with Korean car giant Daewoo to lease 1m acres of land to grow corn for Korea resulted in a civil revolt and a coup. Compounding such issues, in many countries where water is in short supply it is used intensively for crops or products which are then exported.

Politics is not the only significant factor. Around the world, natural habitats are being converted to human use at an alarming rate, accelerating climate change, with deforestation at the worst end of spectrum.

Experts suggest that the underlying trend is for commodity prices to rise. How will this affect business? A good rule of thumb is that a bit of inflation is good for industry, while too much destroys demand.

Companies that may benefit from the new challenges are likely to include those that can ensure continuity of supply and have enough pricing power to pass on costs. In general, food producers and retailers are likely to reap dividends from price inflation, apart from vendors of animal products, where customers are likely to be put off by sharp price rises. Tobacco and beverage companies appear to be beneficiaries: high margins indicate they have few problems in passing on cost increases.

Water

It is estimated that feeding a world population estimated to climb to 9 billion by 2050 will require twice as much water for agriculture compared with today.

Only 2.5% of the world's water resources are fresh, of which two thirds is frozen; oil is not the only resource we should worry about running out of. The market for water-related products and services today is put at over $480bn and set to increase rapidly.

Opportunities for water companies are limitless. Enterprising companies can concentrate on finding new reservoirs, updating infrastructure, fixing leaks, installing water meters to encourage customers to use less, and exploring desalination technology, though the latter is energy- and carbon-intensive.

But companies in general have a role to play. Beverages companies are among the leaders when it comes to water management. SAB Miller, for instance, has invested significant management time in understanding water-supply challenges and their related business implications. It has formed partnerships with public and non-governmental organisations, having acknowledged that water is too complex an issue for any one company or stakeholder to tackle on its own.

For nuclear energy companies, challenges lie ahead. Nuclear power has been billed as a cleaner option than coal, but nuclear power plants use up to 83% more water per megawatt. The blueprint for meeting future energy demands tend to concentrate on CO2 emissions, while largely overlooking water consideration. Clearly, there is much work to be done.

What about the implications of water for the digital industry? How many people know that a data centre operating chillers and cooling towers can consumer 18,000 gallons of water daily to dissipate the heat generated by the IT equipment? The water footprint of the internet and e-commerce is huge and growing fast. Few companies will remain unaffected by the need to manage water resources more efficiently.

Without action to create more sustainable societies, economic activity will be threatened by wars, political coups, terrorism and mass migration, whilst the shadow of resource constraints looms large. But if more people are pulled out of poverty, societies are likely to be more stable and new consumer markets will open up to companies prepared to serve them.Benjamin McCarron, analyst at The Co-operative Asset Management, says: "When the recession fades, governments and companies will have to reckon with the troubling health indicators of the planet, which pose the most formidable challenges to economic stability. Our study shows that while the risks to some companies are great, so are the opportunities for the far-sighted and the early movers."

In the near future, enormous demands will be placed on the earth's resources. There is a wave of aspiration from disadvantaged sections of society around the world and new consumer demands from an emerging global middle class; the challenge is achieving growth and satisfying people's desire for goods and services without destroying the planet.

Despite the challenges ahead, courageous companies can still prosper. Governments, consumers and businesses are slowly moving to support those that provide solutions to the planet's growing pains.